Page 10 - 2018 FAC4864 Test 4 slides - Borrowing Costs & IFRS 5
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BORROWING COSTS
Definitions
• Borrowing costs are interest and other costs incurred by an
enterprise in connection with the borrowing of funds.
• IAS 23 states that borrowing costs may, among other things,
include the following:
• Interest expense calculated using the effective interest method
• Finance charges in respect of finance leases recognised in accordance
with Leases standard
• Exchange differences arising from foreign currency borrowings to the
extent that they are regarded as an adjustment to interest costs.
• A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale.
• The meaning of a substantial period of time is not defined by
IAS 23.
• Professional judgment should be used to determine how long a
"substantial period of time" is.
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